SYLLABUS FOR THE COURSE

“RAISING CAPITAL IN THE WORLD FINANCIAL MARKETS:

INTRODUCTION TO FINANCIAL AND LEGAL CONSIDERATIONS”

Carlos E. Martinez

June 4-8, 2007

General

I. Introduction to the World Financial Markets

A. What are the world financial markets?

B. Cycles and history

C. Products

D. Risk analysis

  1. Country
  2. Industry
  3. Company
  4. Product

E. Legal framework

Debt

II. Syndicated Loans

A. Types of loans

  1. Term vs. revolver
  2. Bridge vs. permanent
  3. Fixed vs. variable
  4. Amortizing vs. bullet

B. Risk

  1. Company
  2. Project
  3. Asset

C. Enhancements

  1. Guarantees
  2. Security interests
  3. Multilateral agencies
  4. Restrictive covenants
  5. Escrow accounts
  6. Political risk insurance
  7. Rating
  8. Letters of credit
  9. Control of funds flow

D. Protection of ranking

  1. Secured vs. unsecured
  2. Senior vs. subordinated
  3. Structural subordination
  4. Restrictive covenants
  5. Limitation on acceleration
  6. Guarantees

E. The Credit Agreement

  1. Basic financial terms and payment mechanics
  2. Yield protection
  3. Representations and warranties
  4. Covenants
  5. Events of default
  6. Conditions to closing
  7. Agent’s rights and obligations
  8. Assignment and participation
  9. Governing law and jurisdiction

III. Debt Offerings

A. U.S. securities law framework

  1. Fundamental bodies of law
  2. Securities Act of 1933
  3. Exchange Act of 1934
  4. Investment Company Act of 1940
  5. Trust Indenture Act of 1939
  6. Sarbanes-Oxley Act 2002
  7. Basic Principles
  8. Disclosure
  9. Prevention of fraud and manipulation of the market
  10. Registration with the SEC
  11. Registration statement
  12. Ongoing reporting requirements
  13. Exemptions from registration
  14. Security exemptions
  15. Issuances by the US government
  16. Commercial paper of nine months or less
  17. Issuances pursuant to bankrupcty reorganization
  18. Exchange with existing holders
  19. Transaction exemptions
  20. Transactions by any personsother an than issuer, dealer or underwriter
  21. Transactions by an issuer not involving a public offering
  22. Resales to qualified institutional buyers (Rule 144A)
  23. Offshore transactions safe-harbor (Regulation S)
  1. Publicity/Gun jumping
  2. Corporate governance
  3. Market manipulation

B. Structure

  1. One-time vs. shelf/program
  2. Public vs. private
  3. Sovereign/corporate
  4. Secured vs. unsecured
  5. Corporate vs. asset- or project-based

C. The Process: from kick-off meeting to closing

  1. Engagement letter
  2. Kick-off meeting
  3. Legal and financial due diligence
  4. Drafting of offering document
  5. Drafting and negotiation of deal documents
  6. Corporate and regulatory approvals
  7. Printing of preliminary offering document
  8. Rehearsal and roadshow
  9. Pricing
  10. Closing

D. The role of the underwriter

  1. Origins
  2. Syndicate and commissions
  3. Inherent conflicts: sell side and analysts
  4. NASD regulations

E. Due diligence

  1. Regulatory requirements (U.S. vs. English style)
  2. Preparation by the issuer
  3. Code of ethics
  4. Document request list
  5. Officers’ and directors’ questionnaires
  6. Due diligence meeting
  7. Data room
  8. 10b-5 opinion
  9. Comfort letter

F. Offering Document

  1. Summary
  2. Risk factors
  3. Use of proceeds
  4. Capitalization
  5. Selected financials
  6. Operating and financial review and prospects
  7. Description of business
  8. Description of the industry
  9. Description of management and shareholders
  10. Related party transaction
  11. Description of securities offered
  12. Other

G. The Indenture

  1. Issuance and registry of debt securities
  2. Covenants
  3. Events of default
  4. Trustee’s rights and obligations
  5. Governing law and jurisdiction

H. The Purchase Agreement

  1. Payment mechanics
  2. Covenants
  3. Indemnity
  4. Conditions to closing

I. Clearing

  1. The Depository Trust Company
  2. Euroclear and Clearstream

IV. Securitizations

A. Purpose

B. Nature of assets

  1. Relatively homogeneous
  2. Transferable
  3. Predictable flows
  4. Reasonable underlying risk

C. Structure

  1. Loan or debt offering
  2. Special purpose vehicle
  3. No managerial discretion
  4. Pass-through tax entity
  5. Bankruptcy-remote
  6. True sale
  7. No consolidation
  8. Enhancements
  9. Originator add-ons
  10. Flow-to-service coverage ratio
  11. others

V. Project Finance

A. Purpose

B. Structure

C. Risk analysis

  1. Construction risk
  2. Operation and maintenance risk
  3. Commercial risk
  4. Force majeure risk

D. Project Agreement

E. Construction Agreement

F. Operation and Maintenance Agreement

G. Loan Agreement

VI. Debt Restructuring

A. When and how to restructure

  1. Determination
  2. Identification of indebtedness
  3. Understanding legal and contractual parameters
  4. Analysis of alternatives

B. Alternatives

  1. Repurchases
  2. Amendment
  3. “Voluntary” exchange offer/Acuerdo Previo Extrajudicial
  4. Bankruptcy and reorganization
  5. Liquidation
  6. Litigation

C. Process

  1. Determination of structure
  2. Preparation of business plan
  3. Contact with creditors
  4. Negotiation

EQUITY

VII. Venture Capital Investment

A. Purpose

B. Structure

  1. Type of equity security
  2. Voting rights
  3. Economic rights
  4. anti-dilution mechanisms
  5. preference in liquidation/distributions
  6. Exit strategy
  7. tag along
  8. drag along
  9. registration rights
  10. acquisition

C. Shareholders Agreement vs. Bylaws

VIII. Equity Offerings

A. Purpose

B. Process and structure

  1. Type of equity security
  2. Preemptive and accrual rights
  3. Private vs. public
  4. Stock exchange listing

C. ADRs

  1. What are they?
  2. Deposit Agreement
  3. Issuance of ADRs
  4. Pass-through of voting and economic rights
  5. Duties of depositary bank
  6. Termination

D. Tender Offers/Repurchases

  1. Purpose
  2. What is a “tender offer”?
  3. Legal requirements of a “tender offer”
  4. Cross-border tender offers
  5. Repurchase plan
  1. Purpose
  2. Legal requirements
  3. Repurchases in the market
  4. Block purchases

IX. Recent Developments

A. The Enron scandal

  1. Background
  2. Facts
  3. The culprits, real or perceived
  4. The victims

B. Sarbanes-Oxley

  1. Genesis
  2. Actions
  3. Public Company Accounting Oversight Board
  4. Certification of financial information by CEO and CFO
  5. Tighter off-balance sheet contingency disclosure
  6. Independent audit committees with more powers
  7. Attestation of internal controls
  8. Independent board of directors
  9. Code of ethics
  10. Analyst certifications
  11. Block-out periods
  12. Refund executive compensation if financials are restated
  13. Insider trading disclosure (2 days)
  14. Reaction
  15. Voluntary changes in accounting of executive compensation
  16. Some foreign issuers shy away from U.S. markets
  17. Investment banks under intense pressure from investors, SEC and U.S. Department of Justice
  18. Accounting firms have become very conservative and are firing clients
  19. Substantial increase in compliance costs

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